Transactions at TPBank in Ha Noi. — VNS Photo

HA NOI (Biz Hub) — US rating agency Moody's for the first time assigned long-term local and foreign currency deposit and issuer ratings of B2 to Tien Phong Commercial Joint Stock Bank (TP Bank), with stable outlook.

Moody's Investors Service rates the lender's short-term local and foreign currency deposit and issuer at ‘not prime'.

The bank's baseline credit assessment (BCA) and adjusted BCA has been rated at B3. Moody's has assigned Counterparty Risk Assessments of B2(cr)/NP(cr) to the bank.

"The B2 long-term ratings assigned to TP Bank reflect: (1) its BCA of B3, and (2) a one-notch uplift based on Moody's expectation of a "moderate" probability of support from the government of Vietnam (B1 stable)," Moody's said in a statement released Monday.

TP Bank's asset risk is elevated but largely in line with the average for other rated banks in Vietnam. Around 6 per cent of its adjusted gross loans were problematic at end of June 2016. "Moody's expects that TP Bank's asset risk will remain elevated in the next 12 to 18 months, because of rapid loan growth. TP Bank's loan growth amounted to 42 per cent in 2015 and 30 per cent in the first half of 2016, which Moody's views as above-market growth."

In a move to strengthen its capital buffer in order to accommodate asset growth, TP Bank successfully attracted the International Finance Corporation (IFC) to be its shareholdersafter making a quasi-equity investment of VND403.1 billion (US$18.35 million) in dividend preferred shares in the third quarter of 2016. This transaction has improved the bank's regulatory Tier-1 ratio by around 100 basis points, but had a neutral effect on Moody's tangible common equity (TCE) ratio, because Moody's does not include preferred shares in its calculation of core capital.

In terms of government support for TP Bank, Moody's uses the same "moderate" support assumption as for other private sector banks in Viet Nam. As a result, TP Bank's B2 long-term ratings incorporate one notch of uplift from its B3 BCA. The "moderate" support assumption is mainly underpinned by the bank's market share of around 1.2 per cent of system assets as of June 2016.

TP Bank was one of the nine banks classified by the central bank as weak lenders that needed restructuring in 2009. The bank is privately owned and major shareholder groups include SBI Holdings and related companies (around 20 per cent combined stake), DOJI Group and related individuals (19.9 per cent), FPT Corporation (around 9 per cent) and IFC (4.99 per cent). — VNS